Australia shares at 14-month highs as currency retreats

Wednesday, 3 Oct 2012 | 3:08 AM ET

SHARES

MELBOURNE, Oct 3 (Reuters) - Australian shares edged up to a 14-month closing high on Wednesday as banks and broader stocks were boosted by an interest rate cut and a weaker local dollar, enhancing export prospects.

Shares were knocked from intraday highs after Australia's trade deficit blew out to its widest in three-and-a-half years as falling prices for iron ore and coal ate into export earnings, sending the Australian dollar to a one-month low.

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The benchmark S&P/ASX 200 index

still closed up 0.1 percent, or 5.6 points, at 4,438.6, its strongest finish since August 1, 2011. It had touched 4,454.6 in early trade after a rise of 1 percent on Tuesday.

The index is up 11 percent from this year's low.

"Today was more about consolidation of Tuesday's gains on the local front," Said Tim Waterer, trader at CMC Markets.

He noted markets were cautious after Spain said a request for European aid was not imminent.

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"The ECB's grand plans regarding bond purchases will remain on ice while Spain does not extend its arm for help, so financial markets are at present feeling a little empty when it comes to the outlook for the Eurozone," Waterer said.

"We were lagging other markets. We've been a little bit wishy-washy here and haven't really done much, so the market's just saying 'Okay, we've had a rate cut now, and hey, around 7 percent growth in China ain't that bad.' And the currency dropping back is always a help in this market," she said.

APN News & Media Limited

rallied 18 percent to NZ$0.53 after it confirmed a strategic review of its New Zealand assets was ongoing.

Bionic ear maker Cochlear Ltd

rose 0.6 percent to A$69.25 after the Australian Financial Review said it had won a A$100 million contract with the Chinese government earlier this year. The company is currently bidding for a five-year contract worth A$600 million.

Shares in Boart Longyear

, down 40 percent so far this year, rose 0.9 percent to A$1.68 after it said CEO Craig Kipp was leaving and a search was underway to replace him. In August, the company cut its full-year earnings guidance to a rise of 10 percent at most, from earlier guidance of a 29 percent rise.